Below is a list of terms, slang, and abbreviations that may helpful in understanding the world of cryptocurrency.
A 51% attack is where more than half of the computing power on a network is operated or controlled by a single individual or cartel, which gives them complete and total control over a network. With 51% of the computing power, they can:
- Halting all mining.
- Manipulating all interpersonal transactions.
- Use singular coins repeatedly
- Issue conflicting transactions to harm the network, should they have the malicious intent to do so.
A cryptocurrency address is essentially the same thing as a physical address. A wallet address is the public portion of the two encrypted keys necessary for a holder to accept or verify a transaction. Cryptocurrency addresses are used to send or receive transactions on the network. An address usually presents itself as a string of alphanumeric characters.
An altcoin is the common name for any coin that isn’t Bitcoin.
Taking advantage of a difference in price of the same commodity on two different exchanges.
Application Specific Integrated Circuit is a chip specifically created to execute one task. Often compared to GPUs, ASICs are made for mining and may offer significant power savings. One such model is an ASIC miner created to only process SHA-256, which is the cipher used by the Bitcoin blockchain to mine new coins. There are ASIC’s for Scrypt which specifically solves the mathematical code in altcoins such as Litecoin.
Someone holding an altcoin in a down price market. Often used to refer to someone holding a coin that is sinking in value after a pump and dump.
An expectation that price is going to decrease.
Bitcoin is the first decentralized, open source cryptocurrency that runs on a global peer to peer network, without the need for middlemen and a centralized issuer.
A blockchain is a shared digital ledger of transactions. The blockchain is comprised of “blocks” and is constantly growing as each new record, or block is added onto the chain. The blockchain serves as a historical record of all transactions that ever occurred, from the genesis block to the latest block. They are essentially public databases that everyone can access and read, but the data can only be updated by the data owners. \
Blocks are entries in a ledger or record keeping book. They are packages of data that carry permanently recorded data on the blockchain network.
Block explorer is an online tool to view all transactions, past and current, on the blockchain. They provide useful information such as network hash rate and transaction growth.
Block height is the number of blocks preceding the genesis block (first block) on the chain. A genesis block will always have a height of zero because nothing precedes it. It’s a metric used to create a bearing on time in the programming world as well as a few other functions such as maintaining counter-party and betting in the crypto world. Considering that a new Bitcoin block is made every 10 minutes, you can work out certain time related pieces of information if you have the total length of the chain. The number of blocks connected on the blockchain.
Block reward is the reward allotted for hashing, or solving the mathematical equation related to a block. The reward for mining a Bitcoin block is 25 bitcoins per block mined, which will halve every 210,000 blocks! A form of incentive for the miner who successfully calculated the hash in a block during mining. Verification of transactions on the blockchain generates new coins in the process, and the miner is rewarded a portion of those.
A margin around the price of a crypto that helps indicate when a coin is overbought or oversold.
An expectation that price is going to increase.
A ledger maintained by a central agency.
The process of storing cryptocurrency offline such as:
- Using a hardware wallet.
- Printing out the QR code of a software wallet and storing it in a safety deposit box.
- Moving the files of a software wallet onto a USB drive.
The act of hashing a transaction and adding it to the blockchain.
Consensus is achieved when all participants of the network agree on the validity of the transactions, ensuring that the ledgers are exact copies of each other.
A digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank. Also known as tokens, cryptocurrencies are digital assets.
Cryptographic Hash Function
Cryptographic hashes produce a fixed-size and unique hash value from variable-size transaction input. The SHA-256 computational algorithm is an example of a cryptographic hash.
DApp (Decentralized Application)
A decentralized application is an application that is open source, operates autonomously, has its back-end code running on a decentralized peer-to-peer network. A DApp can have front-end code and user interfaces written in any coding language that can make calls to its back-end.
DAO (Decentralized Autonomous Organizations)
Decentralized Autonomous Organizations are analogous to corporations that run without any human intervention and surrender all forms of control to a set of rules. A venture capital fund that was built on the Ethereum network was hacked in June 2016 and the hackers stole ~33% of the DAO’s funds. This hack and theft led to Ethereum being hard-forked resulting in Ethereum and Ethereum Classic.
Distributed ledgers are databases that are consensual and synchronized across network spread across multiple sites, CPUs or geographies. It allows transactions to have public “witnesses,” thereby making hacking more difficult. A distributed ledger does not have to have its own currency and may be private. A central ledger is the opposite in that all of the data is controlled by a singular network or individual.
A type of network where processing power and data are spread over disparate nodes rather than having a centralized data center.
Difficulty is how easily a data block of transaction information can be mined successfully. Mining grows more difficult as the chain gets longer.
Ethereum was designed to make mining impossible at some point in the future. An arbitrarily difficult block to mine will effectively create the Difficulty Bomb. When this difficulty bomb is activated, the mining difficulty will skyrocket and make Ethereum mining unfeasible.
A digital code generated by public key encryption that is attached to an electronically transmitted document to verify its contents and the sender’s identity.
Double spending occurs when a sum of money is spent more than once. It can be an attack where the given set of coins is spent in more than one transaction by sending two conflicting transactions in rapid succession into the network
Enterprise Ethereum Alliance. A coalition that connects Fortune 500 enterprises, startups, academics, and technology vendors with Ethereum subject matter experts.
Ethereum is a blockchain-based decentralized platform for apps that run smart contracts: applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third-party interference.
The Ethereum Virtual Machine is a Turing complete virtual machine that allows anyone to execute EVM Byte Code. Ethereum nodes run on the EVM to ensure consensus across the blockchain.
Websites where you can buy and sell cryptocurrencies. There are a growing number of exchange sites but be aware of where you store your coin – hacked exchanges have been a focus of currency theft.
Fiat money is a currency without intrinsic value established as money, often by government regulation. It has an assigned value only because the government uses its power to enforce the value of a fiat currency or because the exchanging parties agree to its value. It was introduced as an alternative to commodity money and representative money. Commodity money is created from a good, often a precious metal such as gold or silver, which has uses other than as a medium of exchange (such a good is called a commodity). Representative money is similar to fiat money, but it represents a claim on a commodity (which can be redeemed to a greater or lesser extent)
A fork is the permanent divergence of the current blockchain in which the blockchain splits into two separate chains temporarily or permanently. Forks are a natural occurrence during mining, where two chains following the same consensus rules temporarily have the same accumulated proof-of-work and are both considered valid. They can also occur as a consequence of the use of two distinct sets of rules trying to govern the same blockchain. Forks have been used in cryptocurrencies in order to add new features to a blockchain or to reverse the effects of hacking or catostrophic bugs on a blockchain as was the case with the fork between Ethereum and Ethereum Classic. Notably, blockchain forks have been widely discussed in the context of the bitcoin scalability problem. Forks can also come into existence when a 51% attack occurs, a bug in the program, or more commonly a new set of consensus rules come into existence. These happen when a development team creates and inserts notably substantial changes into the system. The successful fork is decided by the height of their blocks. Some more information available at: https://en.wikipedia.org/wiki/Fork_(blockchain)
Fear Of Missing Out. The sensation that you need to buy when the price of something starts to skyrocket.
Fear, Uncertainty, and Doubt. Negativity spread by someone that wants the price of something to drop.
Someone that is spreading FUD.
A measurement of how much computational processing is required by the ethereum network to process a transaction. Simple transactions like transferring ether to another address require less gas than more complex transactions such as deploying a smart contract.
The amount of gas you are willing to spend on a transaction. The amount of gas required for a transaction is constrained by the complexity of the operation and if you do not provide for enough gas to complete the transaction, the transaction will fail. Unused gas will be refunded to you at the end of your transaction.
The amount of ether to be spent for each gas unit on a transaction. The initiator of a transaction chooses and pays the gas price of the transaction. Transactions with higher gas prices are prioritized by the network.
Traditional gas prices are as follows (gas prices become less predictable and usually increase during Token Creation Periods) :
- 40 GWEI Gas Price will usually get your transaction recorded into the next block.
- 20 GWEI will should get your transaction within the next few blocks.
- 2 GWEI will likely get your transaction mined within the next few minutes.
The first or first few blocks of a blockchain.
A margin trade that profits if the price increases. This involves buying coin using funds borrowed from another person. It is a risky proposition if the price goes down because the borrower will still owe the funds plus interest.
A margin trade that profits if the price decreases.
Halving is the reduction of mining reward every so many blocks. For Bitcoin the reward is halved after every 210,000 blocks are mined.
A hard fork occurs when a blockchain splits into two incompatible separate chains. This type of fork requires all nodes and users to upgrade to the latest version of the protocol software. This is a consequence of the use of two incompatible sets of rules trying to govern the system.
A physical device that can store cryptocurrency. Hardware wallets are often regarded as the most secure way to hold cryptocurrency.
The act of performing a hash function on the output data which is used for confirming cryptocurrency transactions and assuring integrity of transmitted data. A hash function is any function that can be used to map data of arbitrary size to data of fixed size. The values returned by a hash function are called hash values, hash codes, digests, or simply hashes. A cryptographic hash function allows one to easily verify that some input data maps to a given hash value, but if the input data is unknown, it is deliberately difficult to reconstruct it (or equivalent alternatives) by knowing the stored hash value.
Hashrate is the speed at which a block is discovered and the rate at which the related math problem is solved. Measurement of performance for the mining rig is expressed in hashes per second.
Someone got drunk and made a post on a bitcoin forum with a typo in the place of ‘hold’. It was reported that HODL stands for Hold On for Dear Life and as a meme, that is not far from the truth.
A hybrid PoS/PoW allows for both Proof of Stake and Proof of Work as consensus distribution algorithms on the network. In this method, a balance between miners and voters (holders) may be achieved, creating a system of community-based governance by both insiders (holders) and outsiders (miners).
Initial Coin Offering, somewhat similar to an IPO in the non-crypto world. ICOs are coming under increased scrutiny from the SEC, and recently Bitconnect was shut down because its ICO was considered an unregistered securities offering.
Limit Order (Limit Buy / Limit Sell)
Orders placed by traders to buy or sell a cryptocurrency when the price meets a certain threshold. It is a trading tool that allows for an automated sell/buy point without placing the actual order in advance.
MACD (Moving Average Convergence Divergence)
Moving Average Convergence Divergence is a trading trend indicator that shows the relationship between two moving averages of prices.
The act of magnifying the intensity of your trades by using borrowed funds from a broker or another person to trade a coin, which forms the collateral for the loan from the broker. Margin trading is a double-edged sword because, while the use of borrowed coin can magnify gains, it can also leave the trader with large losses.
The total fiat value of a specific cryptocurrency, calculated by multiplying the total supply of coins by the current fiat price of an individual coin unit. Coincap.io shows a comprehensive run-down of each coin’s market cap: http://coincap.io/
Market order (Market Buy / Market Sell)
A purchase or sale on an exchange at the current price. Market buys purchase the cheapest coin available on the order book, and market sells fill the most expensive buy order on the books.
Mining is the term used for discovering, solving and validating transactions along the blockchain. A reward is given for solving the algorithm and lengthening the chain. The necessity of validation warrants an incentive for the miners, usually in the form of coins (mining reward). Mining can be a lucrative business by choosing the most efficient and suitable hardware and mining target.
A computer especially designed for processing proof-of-work blockchains, like Bit Coin, Bit Coin Cash, and Ethereum. They can consist of multiple high-end graphic processing units (GPUs) to maximize their processing power.
Multisig, or multisignature refers to having more than one signature to approve a transaction. This form of security is beneficial for a company receiving money into their BTC wallet. If a company wants to keep it so that one employee doesn’t have sole access to a transaction, multisig allows for a transaction to be verified by two separate employees before it’s complete. Multi-signature addresses provide an added layer of security by requiring more than one key to authorize a transaction.
Mooning is when the price of a coin is going up astronomical levels.
A node is essentially a computer connected to the coin network that possesses a copy of the blockchain and is working to maintain it. A node supports the network through validation and relaying of transactions while receiving a copy of the full blockchain itself.
Oracles work as a bridge between the real world and the blockchain by providing data to the smart contracts.
Peer to Peer refers to the decentralized interactions between two parties or more in a highly-interconnected network. One of the biggest selling points of blockchain is decentralization; nearly every interaction on the blockchain can be fulfilled P2P, or without a centralized variable like a store, bank or notary. Participants of a P2P network deal directly with each other through a single mediation point.
PoW (Proof of Work)
Proof of work was a concept originally designed to sieve spam emails and prevent DDOS attacks. A Proof of Work is essentially a datum that is very costly to produce in terms of time and resources, but can be very simply verified by another party. The proof of work for Bitcoin is referred to as a “nonce,” or number used only once. This has been considered an energy intensive alternative to proof of stake as the computers unfortunately have to be on and running, which also drives the market towards centralization of hashing power… which is what the blockchain aims to defeat! A consensus distribution algorithm that requires an active role in mining data blocks, often consuming resources, such as electricity. The more ‘work’ you do or the more computational power you provide, the more coins you are rewarded with.
PoS (Proof of Stake)
Proof of stake has been considered the greener alternative to PoW. Where PoW requires the prover to perform a certain amount of computational work, a proof of stake system requires the prover to show ownership of a certain amount of money, or stake. A consensus distribution algorithm that rewards earnings based on the number of coins you own or hold. The more you invest in the coin, the more you gain by mining with this protocol. Proof-of-stake (not piece of shit). The proposed future consensus algorithm to be used by Ethereum. Instead of mining in its current form, people that own ETH will be able to ‘lock up’ their ether for a short amount of time in order to ‘vote’ and generate network consensus. The plan is that these stakeholders will be rewarded with ETH by doing so.
A private key is a string of data that allows you to access the tokens in a specific wallet. They act as passwords that are kept hidden from anyone but the owner of the address.
A public address is the cryptographic hash of a public key. They act as email addresses that can be published anywhere, unlike private keys. In cryptography, a public key is a cryptographic key that can be utilized by any party to encrypt a message. Another party can then receive the message and using a key that is only known to that individual or group, decode the message.
Pump And Dump
The recurring cycle of a cryptocurrency getting a lot of attention, leading to a fast price increase, followed by a substantial price crash.
Return on Investment. The percentage of how much money has been made compared to an initial investment. (i.e., 100% ROI means someone doubled their money).
Scrypt is a type of cryptographic algorithm and is used by Litecoin. Compared to SHA256, this is quicker as it does not use up as much processing time.
SHA-256 is a cryptographic algorithm based on the SHA-2 (Secure Hash Algorithm 2) designed by the United States National Security Agency; SHA-256 is a novel hash function computed with 32-bit words. Cryptographic hash functions are mathematical operations run on digital data; by comparing the computed “hash” (the output from execution of the algorithm) to a known and expected hash value, a person can determine the data’s integrity. For example, computing the hash of a downloaded file and comparing the result to a previously published hash result can show whether the download has been modified or tampered with. Learn more at: https://en.wikipedia.org/wiki/SHA-2
Typically every node in a blockchain network houses a complete copy of the blockchain but sharding is a method that allows nodes to have partial copies of the complete blockchain in order to increase overall network performance and consensus speeds.
Shilling (see also Pumping)
Someone essentially advertising or promoting a cryptocurrency. The more extreme promoting earns the title Shilling when it departs from reality.
A signature is the mathematical operation that lets someone prove their sole ownership over their wallet, coin, data or on. Bitcoin uses a particular digital signature scheme called ECDSA. It’s an Elliptic Curve Digital Signature Algorithm, which belongs to US government standards. A Bitcoin wallet may have a public address, but only a private key can verify with the whole network that a signature matches and a transaction is valid. This private key is only known to the owner and is mathematically impossible to uncover.
A two way smart contract is an unalterable agreement stored on the blockchain that has specific logic operations akin to a real world contract. Once signed, it can never be altered. A smart contract can be used to define certain computational benchmarks or barriers that have to be met in turn for money or data to be deposited or even be used to verify things such as land rights. Code that is deployed onto the Ethereum blockchain, often directly interacting with how money flows. Not my quote, but: “A normal transaction allows you to send money from A to B. Smart contracts allow you to send money from A to B, on the condition that C happens.”
A crypto-currency with extremely low volatility that can be used to trade against the overall market.
A soft fork differs from a hard fork where only previously valid transactions are made invalid. Since old nodes recognize the new blocks as valid, a soft fork is backward-compatible. This type of fork requires most miners upgrading in order to enforce, while a hard fork requires all nodes to agree on the new version.
Trend Analysis or Technical Analysis refers to the process of analyzing current charts using a variety of trend tools and lines in an effort to determine which way the market will move.
A test blockchain used by developers to prevent expending assets on the main chain (as opposed to the mainnet which is where actual transactions are occuring).
Tokens are a representation of a particular asset or utility, that resides on top of another blockchain. Tokens can represent any asset that is fungible or can be traded. Tokens can represent such things as commodities, loyalty points, or other cryptocurrencies.
A collection of transactions gathered into a block that can then be hashed and added to the blockchain.
All cryptocurrency transactions involve a transaction fee. The transaction fee is a payment to the miner for adding a transaction to the blockchain.
Turing complete refers to the ability of a machine to perform calculations that any other programmable computer is capable of. An example of this is the Ethereum Virtual Machine (EVM).
Wall (Sell Wall / Buy Wall)
Using a depth chart, traders can see the current limit buy and sell points. The graphical representation on the depth chart looks like walls.
A file or device that stores private keys. It often involves a software client which allows the user to view and create transactions on the blockchain that the wallet is designed for.
Someone that owns a large amount of crypto-currency.